Amazon deals

Sunday, December 17, 2017

Sensex, Nifty charts (Dec 15, 2017): poised to breakout above 'flag' patterns

FIIs and DIIs were both net sellers of equity in the week gone by. FII net selling was worth Rs 6.1 Billion. DII net selling was worth Rs 6 Billion.

Incidentally,  FIIs were net buyers on Tue. & Thu. while DIIs were net buyers on Mon. & Fri. Sensex and Nifty gained 0.6% on a weekly closing basis while consolidating sideways within bullish 'flag' patterns.

India's WPI inflation rose to an 8 months high of 3.93% in Nov '17, against 3.59% in Oct '17 and 1.82% in Nov '16 - on the back of higher food and oil prices.

Exports were up 30.6% while imports were up 19.6% YoY in Nov '17. Exports were worth $ 26.2 Billion against imports of $ 40 Billion - leaving a trade deficit of $ 13.8 Billion (higher than $ 13.4 Billion in Nov '16 but lower than $ 14 Billion in Oct '17).

BSE Sensex index chart pattern



Note the following remarks in last week's post on the daily bar chart pattern of Sensex: "The index needs to cross convincingly above its previous (Nov 28) top of 33770 for bulls to wrest control. Bears may try to prevent that from happening - at least till Gujarat state election results are announced."

Exit polls on Thu. Dec 14 predicted comfortable victories for NDA in Gujarat and Himachal Pradesh state elections. Bulls celebrated. The index formed an upward 'gap' on Fri., but stopped short of the upper edge of the 'flag' pattern and the Nov 28 top of 33770.

It seems bulls and bears were uncertain about the actual election results (to be announced on Mon. Dec 18). That uncertainty was reflected in the formation of a 'shooting star' candlestick pattern on Fri. Dec 15.

Daily technical indicators are looking bullish, even though RSI is still in bearish zone. ROC is showing strong upward momentum, the others are not.

The index is trading above its three EMAs in a bull market. An upward breakout above the 'flag' pattern appears inevitable. Whether the breakout will be followed by a pullback to the top of the 'flag' or not may depend on the margin of NDA's victory in the two states.

Remember that to be technically valid, any upward breakout should be accompanied by a significant increase in volumes.

NSE Nifty index chart pattern



For the past 6 weeks, the weekly bar chart pattern of Nifty has been consolidating within a 'flag' pattern, from which an upward breakout is likely. 

Despite exit poll predictions of comfortable NDA victories in recently concluded Gujarat and Himachal state elections, the index failed to breakout above the 'flag' last week.

Weekly technical indicators are in bullish zones. Only RSI is showing some upward momentum. MACD, RSI and Slow stochastic are showing downward momentum.

Nifty's TTM P/E has increased to 26.46 - well above its long-term average. A few experts on business TV channels have been proffering clever arguments to justify the high index valuation. Ignore them. Once election results are out of the way, market focus will shift to continued meagre earnings of India Inc.

The breadth indicator NSE TRIN (not shown) has fallen sharply in neutral zone and is hinting at some more index upside. With FIIs in selling mood, don't expect a runaway rally.

Bottomline? Sensex and Nifty charts have been consolidating within bullish 'flag' patterns for the past 6 weeks. Upward breakouts from 'flag' patterns are likely. Breakouts - and any subsequent pullbacks - can be used to add to existing holdings.

Friday, December 15, 2017

Portfolio Management Tips For Young Investors

Too many young people rarely, or never, invest for their retirement years. Some distant date, 40 or so years in the future, is hard to imagine. However, without investments to supplement retirement income, if any, retirees will have a difficult time paying for life's necessities.

Smart, disciplined, regular investment in a portfolio of diverse holdings, can yield good long-term returns for retirement and provide additional income throughout an investor's working life.

Read more at: 


https://www.investopedia.com/articles/younginvestors/12/portfolio-management-tips-young-investors.asp

Wednesday, December 13, 2017

Nifty chart: a midweek technical update (Dec 13 ‘17)

During the first three days of trading this week, FIIs were net buyers of equity worth Rs 0.8 Billion. DIIs were net sellers of equity worth Rs 8.6 Billion, as per provisional figures. Interestingly, both were net sellers of equity today. Nifty lost 73 points (0.7%).

There has been a setback in India's macroeconomic front. CPI inflation increased to a 15 months high of 4.88% in Nov '17 against 3.58% in Oct '17 due to rising food and oil prices. RBI may have no option but to raise interest rates.

The Index of Industrial Production (IIP) slowed to 2.2% in Oct '17 against an upwardly revised 4.14% in Sep '17 due to a contraction in consumer durable goods production for the second straight month.


The following remarks were made in last week's update on the daily bar chart pattern of Nifty: "Can the index bounce up from here? Technical signals...are conducive, but a sharp rally - like the one during Oct '17 - seems unlikely."

On Wed. Dec 6, the index was testing support from its 100 day EMA (not shown), and did bounce up above its 20 day and 50 day EMAs during the next three trading sessions. 

Bears sold the rise and pushed the index to a close below its 50 day EMA today. By bouncing up after touching an intra-day low of 10033 on Dec 6, a bullish 'flag' pattern has been formed.

Nifty has been consolidating within the 'flag' for the past 5 weeks - after touching a lifetime high of 10490 on Nov 6. Since a 'flag' is usually a continuation pattern, the expected breakout is upwards.

Daily technical indicators are looking bearish and showing downward momentum. MACD and RSI are in bearish zones. Slow stochastic is in bullish zone. Some more correction within the 'flag' is possible.

Nifty's TTM P/E is at 26.1 - which is much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is rising towards its oversold zone - and can limit index downside. 

Bulls seem undecided about the likely outcome of Gujarat state elections. Anything short of a majority for NDA can lead to more index correction.

Nifty is trading above its rising 200 day EMA in a bull market. Dips can be used to add to existing holdings. Buy more on a convincing breakout above the 'flag' - whenever that occurs.

Tuesday, December 12, 2017

Gold and Silver charts: reeling from strong bear attacks

Gold chart pattern


The following comments were made in the previous post on the daily bar chart pattern of Gold: "Slow stochastic has risen towards its overbought zone, and can limit further upside in gold's price...Strong volume bars on recent down days mean bears are not going to yield much further ground without a proper fight."

On Nov 27, gold's price had touched an intra-day high of 1303.40, but slipped down to close just below the 'resistance zone'. The next day, it touched a slightly lower high of 1301.30, but formed a 'doji' candlestick pattern by opening and closing at almost the same level just below the 'resistance zone'.

That was a sign of indecision and weakness that bears exploited to the hilt. Gold's price plummeted below its three EMAs into bear territory, and is trying to form a bottom at 1245.

Daily technical indicators are looking bearish and oversold. More correction can't be ruled out. However, a pullback towards the 200 day EMA can occur at any time. That will provide a selling opportunity.

On longer term weekly chart (not shown), gold’s price closed below its three weekly EMAs in long-term bear territory.  Weekly technical indicators are showing downward momentum in bearish zones. Slow stochastic has re-entered its oversold zone, and can trigger a pullback.

Silver chart pattern


The following comments were made in the previous post on the daily bar chart pattern of Silver: "..one needs to wait for the eventual breakout (or not) to decide whether to buy, sell or hold. Strong volumes on recent down days mean bears may have a slight edge."

On Nov 29, silver's price broke out below the 'symmetrical triangle' pattern within which it was consolidating during Oct & Nov '17. It then dropped down vertically like a stone to the 'support zone' (between 15.25 & 15.75).

All three EMAs are falling, and silver's price is trading well below them in a bear market. Daily technical indicators are looking bearish and oversold. That can trigger a technical bounce, which will provide bears another opportunity to sell.  

On longer term weekly chart (not shown), silver’s price closed well below its three falling weekly EMAs in a long-term bear marketWeekly technical indicators are looking bearish and showing downward momentum. Slow stochastic is deep inside its oversold zone, and can trigger a pullback.

Monday, December 11, 2017

S&P 500 and FTSE 100 charts (Dec 08 '17): bulls gaining ground

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 continued its gravity-defying rally by touching another new high of 2665 on Mon. Dec 4, but formed a 'reversal day' bar (higher high, lower close). 

That triggered a brief correction down to 2624.75 on Wed. Dec 6. Bulls bought the dip once again. The index closed above 2650 with a small 0.3% gain on a weekly closing basis.

The index is trading above its three rising EMAs in a bull market. Daily technical indicators are in bullish zones. MACD and RSI are looking overbought.

Despite the relentless rise of the index and bull's 'buy the dip' strategy, strong volumes on recent down-days indicate that bears remain active. Smart money is probably booking profits. 

On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market, but formed a bearish 'hanging man' candlestick pattern. Weekly technical indicators are quite overbought. Slow stochastic failed to touch a new high with the index, and can trigger a correction to the rising 20 week EMA. 

FTSE 100 index chart pattern



The daily bar chart pattern of FTSE 100 oscillated about its 200 day EMA during the first four days of trading. By touching an intra-day low of 7289 on Wed. Dec 6, the index formed a small 'double bottom' reversal pattern.

On Fri. Dec 8, the index rose sharply above its 200 day and 20 day EMAs and the 7400 level with a volume surge (not shown) - only to face strong resistance from its falling 50 day EMA. It closed just below 7400, with a gain of 1.3% on a weekly  closing basis.

Daily technical indicators are showing upward momentum. MACD and Slow stochastic are rising in bearish zones. RSI has moved up to its neutral zone. 

A convincing move above the (purple) down trend line is required if bulls wish to shake off bear shackles. (At the time of writing this post, bulls are in the midst of an attempt to do so.)

On longer term weekly chart (not shown), the index bounced up to close just below its 20 week EMA, but above its 50 week and 200 week EMAs in a long-term bull market. Weekly MACD is below its signal line in bullish zone. RSI  and Slow stochastic are in neutral zones, and slowing slight upward momentum.

Sunday, December 10, 2017

Sensex, Nifty charts (Dec 08, 2017): bounce up from support levels but not out of the woods yet

Last week, FIIs were net sellers of equity worth Rs 47.7 Billion, as per provisional figures. DIIs were net buyers of equity worth Rs 50.1 Billion.

Sensex gained 417 points (1.3%) and Nifty gained 144 points (1.4%) on a weekly closing basis. Both indices are consolidating sideways with downward biases for the past 5 weeks.

Loan growth of banks hit a 3 years high of 9.6% in Nov '17, against 6.6% in Nov '16 and 9.3% in Nov '15, according to provisional RBI data. Low base effect may have contributed to the higher growth number. Since Oct '17, trend in loan growth to large corporate houses has turned positive.

BSE Sensex index chart pattern



The following comments in last week's post on the daily bar chart pattern of Sensex may be noted: "Some more correction is possible. But bears should not get too enthusiastic. The index is close to the upper edge of the downward-sloping channel, which had provided good support on Nov 15 - and may do so again."

As expected, the index corrected during the first three days of the week to the upper-end of the downward-sloping channel - only to bounce up after receiving good support. 

The index closed above its 50 day EMA on Thu. Dec 7. On Fri., it formed an upward 'gap' of 42 points and closed above its 20 day EMA. So, is the correction-cum-consolidation over?

Not yet. The index needs to cross convincingly above its previous (Nov 28) top of 33770 for bulls to wrest control. Bears may try to prevent that from happening - at least till Gujarat state election results are announced.

Daily technical indicators are showing signs of turning bullish. MACD has stopped falling, and is at its neutral zone. ROC and Slow stochastic have emerged from their respective oversold zones. RSI is rising towards its neutral zone.

If the index continues to rally, resistance can be expected from the zone between 33700 and 33900. 

NSE Nifty index chart pattern



The following comments were made in last week's post on the weekly bar chart pattern of Nifty: "Some more correction can't be ruled out. But proximity to the 'support/resistance zone' between 10100 and 9700 should stall a deeper correction."

The index corrected below its rising 20 week EMA into the 'support/resistance zone' intra-week, but bounced up to close above its three weekly EMAs in a bull market.

For the past 5 weeks, the index has been consolidating within a downward-sloping channel. A convincing upward breakout above the channel will restore control of the chart to bulls.

Weekly technical indicators are in bullish zones. Only ROC is showing upward momentum. MACD, RSI and Slow stochastic are moving sideways.

Nifty's TTM P/E has increased to 26.26 - well above its long-term average. The breadth indicator NSE TRIN (not shown) has fallen sharply from its oversold zone and is hinting at some more index upside.

Bottomline? Sensex and Nifty charts have bounced up from important support levels that were successfully tested three weeks back. Both indices may continue their rally next week, but need to overcome resistance zones.

Saturday, December 9, 2017

A Cautionary View on Future Group stocks

The erstwhile promoter of Pantaloon Retail - a debt-laden company subsequently sold to the Aditya Birla Group - used to be a market darling. 

Aggressive growth at the cost of profits led to his downfall. But you can't keep an ambitious entrepreneur down for long. He reappeared as the promoter of Future Group of companies.

Regular appearances at industry seminars and recent forward-looking statements to various TV channels about becoming one of the leading players in the retail segment had caught my attention.

Two recent articles in moneycontrol.com motivated me to look a little closer at Future Group stocks. The first, published on Dec 7, had a headline: Future Supply Chain IPO subscribed 72% on Day 2.

The second, published on Dec 8, had a headline: Future Consumer Spikes 15%; Morgan Stanley initiates Overweight; sees 61% upside. My mental 'alarm bells' started ringing. Was this article 'planted' to ensure full subscription of Future Supply Chain?

There are already several listed Group companies - Future Enterprises, Future Lifestyle Fashions, Future Consumer, Future Retail, Future Market Networks. Now, Future Supply Chain. What is going on? 

Ambition to succeed is fine - but should it be at the cost of gullible small investors? Future Group can hardly be compared to Tata Group, Birla Group,  Ambani Group or Mahindra Group. So many listed companies seem like a ploy to raise (and siphon off?) money.

Here is a quick look at the fundamentals of Future Group companies (based on Mar '17 annual figures from money.rediff.com):-

1. Future Enterprises: Sales - Rs 3782 Cr; Net Profit Margin - 1.09%; P/E - 59.4
2. Future Lifestyle: Sales - Rs 3877 Cr; Net Profit Margin - 1.18%; P/E - 146.2
3. Future Consumer: Sales - Rs 1645 Cr; Net Profit Margin - 0.46%; P/E - 1359
4. Future Retail: Sales - Rs 17075 Cr; Net Profit Margin - 2.15%; P/E - 67.6
5. Future Market: Sales - Rs 82.5 Cr; Net Profit Margin - (20.8)%; P/E - (36.2)

The five listed companies have a total debt of almost Rs 7000 Cr, and are barely making any profits. How will they service their debt? By raising more equity or, even more debt? The same operating pattern of top line growth at the cost of non-existent bottom line is getting repeated.

Can a leopard change its spots? Caveat emptor.

Friday, December 8, 2017

Bearish Monthly Reversal in EEM Emerging Markets ETF

The iShares MSCI Emerging Markets ETF (EEM​) has been on a steady progression higher for the past 11 months, ever since hitting a swing low of $33.94 in December of last year. Last month, EEM reached a high of $47.93 before it started to weaken. 

From the December low to last month's high, EEM had advanced $13.99, or 41.22%. During that advance, there was a steady pattern of higher monthly lows and higher monthly highs, which identified an uptrend. As of yesterday, that pattern has changed.

Read more at:

https://www.investopedia.com/trading/bearish-monthly-reversal-eem-emerging-markets-etf/

Wednesday, December 6, 2017

Nifty chart: a midweek technical update (Dec 06 ‘17)

During the first three days of trading this week, FIIs were net sellers of equity worth Rs 30.2 Billion. DIIs were net buyers of equity worth Rs 28.5 Billion, according to provisional figures. Nifty lost 78 points (~0.8%).

Low demand due to GST dropped the Nikkei India Services PMI to 48.5 in Nov '17 against 51.7 in Oct '17. (A number below 50 indicates economic contraction.) The Composite PMI (Manufacturing+Services) fell to a 3 months low of 50.3 in Nov '17 against 51.3 in Oct '17.

RBI Governor maintained status quo on interest rates at the MPC meeting today. Higher oil and vegetable prices and their effect on inflation were the main reasons for not reducing rates any further.



The daily bar chart pattern of Nifty had plunged below its 20 day and 50 day EMAs on Thu. Nov 30 & Fri. Dec 1 but had found support from the lower edge of the 'support/resistance zone' between 10200 & 10100.

Strong bear selling breached the support at 10100 intra-day on Tue. Dec 5. Today the index fell further to test support from its 100 day EMA. (Note that the index had earlier bounced up after receiving support from its 100 day EMA on Sep 27.)

Can the index bounce up from here? Technical signals (discussed below) are conducive, but a sharp rally - like the one during Oct '17 - seems unlikely.

Daily technical indicators are in bearish zones and showing downward momentum. Slow stochastic is inside its oversold zone and touched a slightly higher bottom while the index fell lower. The positive divergence can cause an upward bounce.

Nifty's TTM P/E has slipped to 25.7 - which is still much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has risen vertically inside its oversold zone - to a level slightly higher than its Sep 27 level - and can limit index downside.

F&O settlement and RBI's policy meeting are out of the way. But uncertainty about the outcome of Gujarat state elections is keeping bulls on tenterhooks.

A likely technical bounce could face resistance from the 'support/resistance zone' and consolidate a little. If the NDA wins more than 100 seats in the 182 seats Gujarat assembly - which they probably will - expect the index to resume its rally. 

If the NDA wins less than 100 seats, a deeper correction towards the rising 200 day EMA (now at the support level of 9700) may ensue. Either way, the bull market remains intact and corrections can be used to add to existing holdings.

Tuesday, December 5, 2017

WTI and Brent Crude Oil charts: consolidating in bull markets

WTI Crude Oil chart


On Nov 21, the daily bar chart pattern of WTI Crude Oil broke out above the 'symmetrical triangle' pattern within which it was consolidating since the beginning of Nov '17 (refer previous post).

Oil's price rose with good volume support to touch a new high of 59 on Nov 24, but all three daily technical indicators touched lower tops. The negative divergences triggered a pullback towards the top of the 'triangle'.

After touching an intra-day low of 56.75 on Nov 29, oil's price recovered to touch a slightly lower top of 58.90 on Dec 1. The entire trading from Nov 21 onwards appears to be forming another 'symmetrical triangle' pattern.

All three EMAs are rising, and oil's price is trading above them in a bull market. Daily technical indicators are in bullish zones after correcting overbought conditions, but are not showing any upward momentum.

Expect some more consolidation before another breakout can occur. Logically, the breakout should be upwards because oil's price is in a bull market. However, it is better to wait for the breakout because a 'triangle' pattern is unreliable.

On longer term weekly chart (not shown), oil's price made a brief foray above its sliding 200 week EMA, but has slipped down to close just below it. The 20 week and 50 week EMAs are rising towards the 200 week EMA. Weekly MACD and Slow stochastic are in their overbought zones. RSI has  started correcting down from its overbought zone.

Brent Crude Oil chart


The daily bar chart pattern of Brent Crude Oil has been consolidating sideways within a 'symmetrical triangle' pattern since the beginning of Nov '17. The rising 20 day EMA has provided good downside support.

On Dec 1, oil's price had an intra-day breakout above the 'triangle' - touching a high of 64.30 - but faced profit booking and closed at the upper edge of the 'triangle'. It has since corrected to the lower edge of the 'triangle'.

On Nov 30, OPEC, and some non-OPEC, oil producers agreed to extend their production cuts till the end of 2018. Bull enthusiasm was short-lived because drillers in USA added two oil rigs - bringing the total count to 749 (highest since September).

Daily technical indicators are in bullish zones, but showing downward momentum and hinting at a possible downward breakout from the 'triangle'. Wait for the breakout before deciding to buy or sell because a 'triangle' pattern is unreliable.

On longer term weekly chart (not shown), oil's price is consolidating sideways just above its 200 week EMA in long-term bull territoryWeekly MACD and Slow stochastic are inside their overbought zones. RSI formed a small 'double top' reversal pattern inside its overbought zone, and has started to correct.

Monday, December 4, 2017

S&P 500 and FTSE 100 charts (Dec 01 '17): one is overbought, the other is oversold

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 defied gravity by rising almost vertically to touch a new high of 2658 on Thu. Nov 30. Profit booking on Fri. Dec 1 dropped the stock to a test of support from its Tue. Nov 28 low of 2605.

Bulls bought the dip - a strategy they have been successfully following for the past 5 months. The index closed above the 2640 level, with a 1.5% gain on a weekly closing basis.

Daily technical indicators are showing signs of correcting overbought conditions. (The On-Balance Volume indicator - not shown - has been touching lower tops as the index moved higher. The negative divergence is a red flag for bulls.)

On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are overbought. Slow stochastic touched a lower top and can trigger a correction to the rising 20 week EMA. 

FTSE 100 index chart pattern


The (purple) down trend line continues to dominate the daily bar chart pattern of FTSE 100. The index made another futile attempt to break off the bear shackles by moving above the down trend line to touch an intra-day high of 7470 on Tue. Nov 28.

Bears struck immediately. Over the next three trading sessions, the index plunged below its rising 200 day EMA into bear territory - closing at 7300 and losing 1.5% on a weekly closing basis.

On Sep 15 '17, the index had similarly plummeted below its 200 day EMA - only to pullback sharply. Will the pattern repeat this time around? 

Daily technical indicators are looking oversold, and showing downward momentum. However, Slow stochastic is showing positive divergence by not falling below its Nov '17 low.

For the past month, the index has formed a bearish pattern of 'lower tops, lower bottoms'. A possible technical pullback towards the 200 day EMA is likely to face bear selling. 

On longer term weekly chart (not shown), the index dropped to seek support from its 50 week EMA, and closed above its 200 week EMA in a long-term bull market. Weekly MACD is sliding below its signal line in bullish zone. RSI and Slow stochastic have slipped below their respective 50% levels.

Sunday, December 3, 2017

Sensex, Nifty charts (Dec 01, 2017): bears make a strong stand

During the month of Nov '17, FIIs were net sellers of equity worth Rs 135.1 Billion. It was their fourth straight month of net selling. DIIs were net buyers of equity worth Rs 92.4 Billion, as per provisional figures.

On a monthly closing basis, Sensex lost 64 points (0.2%) and Nifty lost 108 points (1%). On Fri. Dec 1, when both indices fell sharply, FIIs were net buyers of equity worth Rs 3.1 Billion. DIIs were also net buyers of equity worth Rs 1.8 Billion.

There was some good news on the macroeconomic front. India's Q2 (Jul-Sep '17) GDP grew 6.3%, against 5.7% in Q1 (Apr-Jun '17) but much lower than 7.5% in Q2 (Jul-Sep '16).

Nikkei India's Manufacturing PMI was 52.6 in Nov '17, against 50.3 in Oct '17 and 52.3 in Nov '16. (A number >50 indicates growth). Auto sales of top 7 manufacturers grew 16% in Nov '17 .

BSE Sensex index chart pattern



The following comments in last week's post on the daily bar chart pattern of Sensex should have sounded a warning bell to those holding long positions: "Expect bears to make a last-ditch stand to prevent bulls from regaining complete control...Index valuation is increasingly looking stretched."

Formation of a small 'reversal day' bar (higher high, lower close) on Tue. Nov 28 triggered profit booking that dropped the index to a close below its 50 day EMA for the first time after 8 weeks.

Daily technical indicators are looking bearish and showing downward momentum. MACD is falling below its signal line in bullish zone. ROC has fallen sharply below its 10 day MA into bearish zone. RSI and Slow stochastic have dropped below their 50% levels inside bearish zones.

Some more correction is possible. But bears should not get too enthusiastic. The index is close to the upper edge of the downward-sloping channel, which had provided good support on Nov 15 - and may do so again.

The fact that FIIs and DIIs were both net buyers on Fri. Dec 1 is another sign that the correction may be coming to an end. 

FIIs may resume selling on any technical bounce due to calendar year-end considerations. Sensex may consolidate - till Gujarat state election results are announced on Dec 18th - before resuming its rally. 

NSE Nifty index chart pattern



The weekly bar chart pattern of Nifty plummeted to seek support from the 10100 level on profit booking caused by concerns about India's widening trade deficit. The 20 week EMA is just below the 10100 level, and should provide additional support.

Weekly technical indicators have corrected overbought conditions, and are showing downward momentum in bullish zones.

Some more correction can't be ruled out. But proximity to the 'support/resistance zone' between 10100 and 9700 should stall a deeper correction.

Nifty's TTM P/E has slipped to 25.90, but remains well above its long-term average. The breadth indicator NSE TRIN (not shown) has risen rapidly towards its oversold zone and can limit index downside.

Bottomline? Sensex and Nifty charts have corrected down to test important support levels that were successfully tested two weeks back. Some more correction is possible. But don't expect a deep correction.

Friday, December 1, 2017

Avoid BitCoin like the Plague: Vanguard's Bogle

Although bitcoin's price has continued to move upward, reaching to a new high of over $10,000 per coin earlier this week, there are still some very prominent detractors of the leading cryptocurrency...Bogle spoke about the cryptocurrency at a Council on Foreign Relations event in New York earlier this week, where he told audience members to "avoid bitcoin like the plague."

Bogle explained that "bitcoin has no underlying rate of return." He told audience members at the event that "you know bonds have an interest coupon, stocks have earnings and dividends, gold has nothing. There is nothing to support bitcoin except the hope that you will sell it to someone for more than you paid for it."

Read more at: 


https://www.investopedia.com/news/vanguards-jack-bogle-says-no-bitcoin/

Wednesday, November 29, 2017

Nifty chart: a midweek technical update (Nov 29 ‘17)

FIIs were net sellers of equity worth Rs 12.7 Billion during the first three days of trading this week. DIIs were net buyers of equity worth Rs 4.1 Billion, as per provisional figures.

Nifty lost only 29 points (0.3%), and continues to trade above its three rising EMAs in a bull market.

India's GST collection in Oct '17 fell to Rs 833 Billion from more than Rs 900 Billion in each of the previous three months due to some reduction in rates, refunds given to exporters and credit claimed by businesses.


The following concluding remarks were made in last week's technical update on the daily bar chart pattern of Nifty: "...a convincing move above the Nov 6 top of 10490 is required for bulls to regain complete control of the chart. Bears may try to prevent that from happening soon."

The index touched an intra-day high of 10410 on Tue. Nov 28, but formed a 'reversal day' bar (higher high, lower close) that stalled the previous 8 days' rally.

Daily technical indicators are in bullish zones but showing some signs of correcting. MACD and RSI are showing slight downward momentum. Slow stochastic has entered its overbought zone.

Nifty's TTM P/E is at 26.51 - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has fallen to the edge of its overbought zone and can limit index upside.

F&O settlement, forthcoming inflation and GDP numbers may have kept bullish enthusiasm in check. Expect some more consolidation or correction before the index makes an effort to cross above its Nov 6 top of 10490. 

Tuesday, November 28, 2017

Gold and Silver charts: tussle between bulls and bears remain unresolved

Gold chart pattern


The daily bar chart pattern of Gold shows a sideways consolidation for the past two months - facing resistance from the 'Support/resistance zone' (between 1300 & 1310) and receiving support from the 200 day EMA . However, bulls are trying to gain ground gradually. 

Gold's chart appears to be forming a bullish 'rounding bottom' pattern, which is more clearly visible on the 20 day EMA. Another attempt may be made by bulls to push gold's price above the 'support/resistance zone'. The previous attempt on Oct 16 had failed.

Daily technical indicators have turned bullish. MACD and RSI have just entered bullish zones. Slow stochastic has risen towards its overbought zone, and can limit further upside in gold's price. All three have formed bullish patterns of 'higher tops, higher bottoms' during the past month.

Strong volume bars on recent down days mean bears are not going to yield much further ground without a proper fight.

On longer term weekly chart (not shown), gold’s price closed above its three weekly EMAs in long-term bull territory.  Weekly MACD and RSI are moving sideways in bullish zones. Slow stochastic has climbed out of its oversold zone, but is showing negative divergence by touching a lower bottom.

Silver chart pattern


For the past 7 weeks, the daily bar chart pattern of Silver has been consolidating sideways within a 'symmetrical triangle' pattern. All three EMAs are moving sideways within the 'triangle'; silver's price is oscillating about the three EMAs.

Daily MACD and RSI are in their neutral zones. Slow stochastic has dropped below its 50% level, but is trying to recover. What will be silver's next move?

That's a good question. A 'triangle' is an unreliable pattern because a breakout can occur either above or below the 'triangle'. There is a third possibility also. Silver's price can continue to meander sideways and move through the apex of the 'triangle'.

[If the latter situation does arise, a horizontal line through the apex of the 'triangle' (at 17) can become a trend deciding level. Above 17 will be bullish; below 17 will be bearish.]

So, one needs to wait for the eventual breakout (or not) to decide whether to buy, sell or hold. Strong volumes on recent down days mean bears may have a slight edge.

On longer term weekly chart (not shown), silver’s price closed just below its 20 week & 50 week EMAs, and well below its sliding 200 week EMA in a long-term bear marketWeekly MACD and RSI are in neutral zones. Slow stochastic is in bearish zone.

Monday, November 27, 2017

S&P 500 and FTSE 100 charts (Nov 24 '17): in long-term bull markets but FTSE showing near-term weakness

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 didn't stay below the (purple) down trend line for very long. On Tue. Nov 21, the index crossed above the trend line with an upward 'gap' that forced bears to retreat once again.

On Fri. Nov 24, the index touched an intra-day high of 2604, and closed above the 2600 level for the first time - gaining 0.9% on a weekly closing basis.

Daily technical indicators are looking bullish. MACD is about to cross above its signal line and re-enter its overbought zone. RSI has bounced up after receiving support from its 50% level, and is moving up towards its overbought zone. Slow stochastic has entered its overbought zone.

Note that all three indicators are showing negative divergences by failing to touch new highs with the index. A pullback towards the down trend line is a possibility.

The index is trading above its three rising EMAs in a bull market, and is climbing a wall of technical worries. That is what bull markets do. 

Profit booking often ensues when an index touches a new high. So, remain circumspect, maintain a trailing stop-loss and enjoy the bull ride.  

On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are overbought and can trigger a correction. 

FTSE 100 index chart pattern


The following comment was made in last week's post on the daily bar chart pattern of FTSE 100: "..an oversold Slow stochastic can also trigger a pullback towards the (purple) down trend line."

The index bounced up after receiving support from the 7350 level on Mon. Nov 20. On Wed. Nov 22, the index climbed above its falling 20 day and 50 day EMAs, the (purple) down trend line and the 7460 level intra-day, but faced selling pressure and closed below 7420.

A bearish 'shooting star' candlestick pattern got formed. It triggered a sideways consolidation with a downward bias. The index eked out a 0.4% gain on a weekly closing basis, and remained in bull territory above its 200 day EMA.

Daily technical indicators are looking bearish, and showing slight downward momentum. The (purple) down trend line continues to dominate the chart - as it has done for almost 6 months.

On longer term weekly chart (not shown), the index closed just below its 20 week EMA but above its 50 week and 200 week EMAs in a long-term bull market. Weekly MACD is sliding below its signal line in bullish zone. RSI and Slow stochastic are seeking support from their respective 50% levels.

Sunday, November 26, 2017

Sensex, Nifty charts (Nov 24, 2017): bears down but refusing to get counted out

FIIs were net sellers of equity worth Rs 18.7 Billion during the week. DIIs were net buyers of equity worth Rs 29.3 Billion, as per provisional figures. Both Sensex and Nifty gained 1% on a weekly closing basis.

The government has amended the Insolvency & Bankruptcy Code (IBC). Wilful defaulters and entities whose accounts have been classified as NPAs will now be barred from bidding for assets under IBC.

On Fri. Nov 24, global rating agency S&P retained India's sovereign rating at BBB- with a stable outlook. This is the lowest of all investment-grade sovereign ratings. [The possibility that S&P may not follow Moody's in upgrading India's sovereign rating was mentioned in this post.]

BSE Sensex index chart pattern



The daily bar chart pattern of Sensex has resumed its rally and is trading above its three rising EMAs in a bull market. The Nov 7 top of 33866 is within handshaking distance. A new high appears just around the corner.

Bears are trying their level best to make life difficult for bulls. A look at the daily technical indicators will explain why.

MACD is about to cross above its falling signal line in bullish zone, but isn't showing much upward momentum. ROC has crossed above its 10 day MA into bullish zone, but isn't showing much upward momentum either. RSI is meandering along its 50% level. Slow stochastic is about to enter its overbought zone.

Refusal to upgrade India's sovereign rating by S&P may spur FIIs to increase their selling. F&O settlement on Thu. Nov 30 may restrain DII buying. Expect bears to make a last-ditch stand to prevent bulls from regaining complete control.

Continuous domestic liquidity flow into MF accounts is propelling the index higher even though earnings of India Inc. haven't improved much. Index valuation is increasingly looking stretched.

This is not the time to get excited and place huge bets. The time to do that was back in Dec '16. Be circumspect and very choosy about what you buy near a market top. Quality should take precedence over quantity.

NSE Nifty index chart pattern



The weekly bar chart pattern of Nifty continued to rally after bouncing up from the support level of 10100 in the previous week. The Nov '17 top of 10490 remains a hurdle that needs to be crossed convincingly if bulls are to regain complete control of the chart.

Weekly technical indicators are looking overbought, and showing negative divergences by moving lower when the index moved higher. MACD is about to slip below its signal line. ROC is ready to cross below its 10 week MA. RSI and Slow stochastic are at the edges of their respective overbought zones.

Some consolidation or correction can be expected during F&O expiry week. The index is trading above its three rising EMAs in a bull market. "Buy the dips" tactics can be used to add to existing holdings.

Nifty's TTM P/E has increased to 26.59 - well above its long-term average. The breadth indicator NSE TRIN (not shown) is rising in neutral zone and can limit index upside.

Bottomline? Sensex and Nifty charts have resumed their rallies after bouncing up from important support levels. Bulls are regaining control. Index valuations are looking stretched. Look for opportunities in individual stocks with good fundamentals that are recovering after recent corrections.